In advanced countries, the Central Bank and the Government are two independent agencies, however, in terms of policies, they are very synchronized. In the Covid-19 years, most states around the world pumped money to save the economy. In which, the Central Bank uses monetary policy to pump money through the commercial banking system, the government increases spending to pump money through projects. These two policies both pumped money and sucked money together, so they handled the crisis well.
In Vietnam, the State Bank (name of the Central Bank of Vietnam) is a ministerial-level agency in the Government. Thus, the Government and the State Bank are not independent of each other but are run by the Prime Minister. Although they are interdependent, the monetary policy of the State Bank and the fiscal policy of the Government are not synchronized. Sometimes, monetary policy injects money, while fiscal policy constricts money. The reason why the government’s public investment cash flow is blocked, we have mentioned in many previous newsletters.
During the Covid 19 epidemic, it was necessary for the Government to pump relief packages, but in the end those packages were blocked and could not reach the market. In addition, public investment projects cannot be implemented, so it has been blocked for more than 2 years now, and the Prime Minister does not know how to open it. It can be said that PM Chinh is a terrible Prime Minister, however, in the Politburo, there is no brighter face to be able to run the Government smoothly.
Inflation in 2022 is reported to be below 4%, however, according to our survey, that number is not correct. Most commodities have increased in price in the past year, by at least 20%, so an inflation figure below 4% is not reliable. Especially this year, the bank raised interest rates too high, to more than 13%, which shows that the State Bank is trying to attract money. If inflation is low, why should money be withdrawn? This is proof that Vietnam’s economic situation is very bad.
On May 25, VTC News newspaper had an article: “Lower interest rates are only available on TV, businesses still borrow from banks at 13.9%/year.” The article said that some business directors said that the interest rate reduction is only available on TV, currently, they are still bearing interest on bank loans at 13.9%/year. Recently, the State Bank has continuously lowered interest rates to support people and businesses, however, in reality, lending interest rates are still high and difficult to access.
Obviously, the state says that but it is not, they exhort to lower interest rates to please the people, but in fact, they not only did not lower but increase interest rates. Therefore, it can be said that with this action, the State Bank is silently strangling enterprises, so that businesses scream no one hears.
According to our own research, in addition to raising interest rates, banks also prevent businesses from lending with procedural barriers. It is still not easy to get a loan even though accepting high interest rates, many businesses have to bribe banks to get loan documents approved. In general, the current situation of Vietnam’s capital market is not what the State Bank announced.
On May 24, CafeF newspaper had an article “The director of the business brought 2 bags of money to the bank’s director’s office to ‘lubricate’ the loan.” The title of the article says it all, businesses hungry for capital, even if they accept high interest rates, cannot access bank capital, so they have to pay bribes.
Currently, both the State Bank’s monetary policy and the Government’s fiscal policy are confused about the current state of the economy. The top leaders in the regime are incompetent to deal with it. However, 100 million people are so low that they are powerless, they do not have the right to take to the streets to protest to depose the incompetent people who are leading the country.